Financial watchdog chief's growing clout comes into focus after agency avoids public institution status

Lee Chan-jin, governor of the Financial Supervisory Service, delivers a New Year’s address at the pan-financial sector New Year's gathering held at Lotte Hotel in Seoul, Jan. 5. Joint Press Corps

The growing influence of Financial Supervisory Service (FSS) Gov. Lee Chan-jin is once again in the spotlight following the government’s decision to postpone classifying the financial watchdog as a public institution, according to industry insiders Friday.

For the FSS, public institution status has long been viewed as a worst-case scenario, raising concerns that it could erode the watchdog’s independence and autonomy in financial supervision. The agency was effectively spared from that risk after the finance ministry opted not to proceed with the designation.

The FSS has also been backed by President Lee Jae Myung in its push to expand special judicial police powers, further reinforcing perceptions of the governor’s rising clout.

Lee, who was appointed in August last year as the first FSS chief under the Lee Jae Myung administration, was a classmate of the president at the Judicial Research and Training Institute and previously served as a defense attorney in the president’s election law violation case and other cases.

At a meeting on Thursday, the Ministry of Economy and Finance decided to put off designating the FSS as a public institution.

“The designation could help strengthen public accountability and transparency at the FSS, but at the same time, it could also undermine the agency’s autonomy and professional judgment, potentially leading to inefficiencies,” Finance Minister Koo Yun-cheol said.

Had it been classified as a public institution, the FSS would have been required to comply with a range of obligations, including management disclosures and performance evaluations.

Created under the Act on the Establishment of the Financial Services Commission (FSC), the FSS is a special non-capital corporation that operates in a quasi-public capacity — legally a private entity, but charged with supervising and inspecting financial institutions.

The finance ministry’s decision means the watchdog will continue to operate outside the government’s direct management and control framework.

The decision comes amid escalating friction between the FSS and the FSC, which is the country’s top financial regulator and the watchdog’s supervisory authority, over the FSS’s push for broader special judicial police powers.

Expanding special judicial police authority has long been a key priority for the FSS. The agency has argued that the ability to initiate investigations is critical to improving the efficiency of probes into unfair trading practices, while the FSC has maintained a cautious stance, citing concerns over excessive concentration of power and potential abuse.

The balance shifted abruptly on Tuesday when the president directly raised the need to expand the investigative authority of the FSS at a Cabinet meeting. With the president signaling a clear policy direction, the FSC has come under pressure to take a more accommodating view of the FSS’ request.

This has further drawn attention to Gov. Lee’s influence. Since taking office, he has consistently opposed classifying the FSS as a public institution and has pushed to strengthen its supervisory and inspection functions, while sustaining momentum for expanding special judicial police powers.

“The finance ministry’s decision to defer public institution designation, combined with the president’s remarks indicating support for expanding special judicial police authority, underscores that the FSS governor’s policy and political standing is far from insignificant,” an official at a major financial holding group said on condition of anonymity.

Meanwhile, asset disclosure data released Friday by the government showed that Gov. Lee declared a combined 38.5 billion won ($27 million) in assets held in his own name and those of his spouse and eldest son. The figure ranked him second among incumbent senior government officials subject to disclosure this year.